Order in respect of Shri Vipin Sharma in the matter of GDR issue of Chromatic India Ltd

WTM/SM/IVD/ID4/9169/2020-21
BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA
CORAM: S. K. MOHANTY, WHOLE TIME MEMBER
ORDER
Under Sections 11(1), 11(4) and 11B (1) of the Securities and Exchange Board of India Act, 1992
 

In the matter of Chromatic India ltd.

1. Securities and Exchange Board of India (hereinafter referred to as “SEBI”) conducted an investigation relating to issuance and disclosure of Global Depository Receipts (hereinafter referred to as “GDR”) by Chromatic India Limited (hereinafter referred to as “Chromatic /Company”).

2. Based on the facts unearthed in the course of investigation, wherein, it was noticed that European American Investment Bank AG (hereinafter referred to as “EURAM Bank/Bank”) had granted loan to Vintage FZE (hereinafter referred to as “Vintage”) by way of a Loan Agreement dated October 12, 2010 (hereinafter referred to as the “Loan Agreement”) for making payment towards subscription to the GDR issued by Chromatic and the entire 4.20 million GDR issued by Chromatic were subscribed by only one entity, i.e. Vintage. It was further noticed that the Board of Chromatic had passed a Resolution in its Meeting held on August 13, 2010, wherein inter alia, a decision was taken to open an account with EURAM Bank and also to authorize EURAM Bank to use the GDR proceeds as security against loan.

3. Under the aforesaid facts and circumstances, a common Show Cause Notice (hereinafter referred to as “SCN”) dated June 28, 2017 was issued to the Company and its Directors who had attended and approved the above noted Resolution passed in the meeting held on August 13, 2010, calling upon them to show cause as to why suitable directions shall not be issued against them under Sections 11, 11B and 11(4) of the SEBI Act, 1992. In the SCN, it was alleged that the Company and its Noticee Directors have indulged in a fraudulent scheme of issuance, allotment of GDR. The said fraudulent scheme was executed behind the back of the shareholders and investors, who were not informed about the said pre-fabricated scheme whereby the GDR proceeds were observed to have been pledged as security with EURAM Bank to facilitate the loan availed by Vintage from EURAM Bank solely for subscribing to the GDR of Chromatic, by entering into a Pledge Agreement dated October 12, 2010 with EURAM Bank (hereinafter referred to as the “Pledge Agreement”). It was therefore alleged that the Noticees have committed fraud within the realm of provisions of Securities and Exchange Board of India Act, 1992 (hereinafter referred to as “SEBI Act, 1992”) and SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (hereinafter referred to as “PFUTP Regulations, 2003”). The SCN has also narrated that the GDR were subsequently converted into equity shares and sold in the Indian Securities Market, the GDR proceeds were made available to the Company i.e. Chromatic for its utilisation only after the repayment of loan by Vintage.

To read more in details, find the enclosed file